What is a candlestick?

How to analyse markets using candlestick charts

A candlestick is a simple way of displaying key information about an asset’s price movement over a set amount of time on its chart. They show four different price levels that an asset has reached in a given time period: which can be as short as a second, or as long as a month.

There are three main features of a candlestick.

The colour

The colour of a candlestick is used to denote whether the asset’s price increased or decreased in the given time period. If the candlestick is green, then the asset moved up in price. If it is red, then its price decreased.

The body

The body is the thick main part in the middle of the candle stick. It is used to show the price of the asset at the beginning of the given time period (the opening price) and at the end (the closing price).

If the candlestick is green, then the bottom of the body will be equal to the opening price and the top will be the closing price

If the candlestick is red, the opposite is true and the bottom will show the closing price while the top shows the opening price

The wick

The wick, or the ‘shadow’ of the candlestick is used to show the highest and lowest price points reached by an asset in the time period. It doesn’t matter what colour the candlestick is, the top of the wick (known as the upper shadow) is the highest price, and the bottom (or lower shadow) is the lowest price.

Types of candlestick

The different shapes made by candlesticks often have individual names, and signal certain market conditions. The shooting star, for instance, is a red candlestick with a long upper shadow and no lower shadow that traders believe signals a bear market (as the closing price and lowest price are the same, and some distance from the highest price and opening price).

CFDs are a leveraged product and can result in losses that exceed deposits. You do not own or have any interest in the underlying asset. Please consider the Margin Trading Product Disclosure Statement (PDS) before entering into any CFD transaction with us.

The value of shares and ETFs bought through an IG share trading account can fall as well as rise, which could mean getting back less than you originally put in.

Please ensure you fully understand the risks and take care to manage your exposure.

IG does not issues advice, recommendations or opinion in relation to acquiring, holding or disposing of our products. IG is not a financial advisor and all services are provided on an execution only basis.

The information on this site is not directed at residents of the United States or any particular country outside Australia or New Zealand and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.